Mortgage Renewal Shock Looms for 2026, But Credit Quality Remains Resilient

Toronto | 04 Nov 2025, 09:30 EST —
Canada’s household credit system still looks calm on the surface — but that calm may not last. A new report from CIBC Capital Markets warns that a “renewal wave” peaking in 2026 could test the financial resilience of Canadian borrowers who locked in rock-bottom rates during the pandemic.

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The calm before the storm

At first glance, Canadian credit metrics look strong. Mortgage arrears remain low, consumer delinquencies have stabilised, and household insolvencies sit close to pre-COVID levels. Banks say most clients are current on payments and are managing higher living costs through budget cuts or draw-downs of savings accumulated in 2020-21.

But beneath that surface is a mathematical reality: rates that once began with “1” or “2” now begin with “5.” When those five-year fixed and variable contracts reset in 2026, payment hikes of 20–40 percent could hit tens of thousands of families. A $600,000 mortgage originated in 2021 at 1.8 percent translates to about $2,500 a month; at 5.2 percent, that figure jumps toward $3,300 even if amortisation is extended.

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CIBC’s assessment

According to the report — summarised by Mortgage Professional Australia — overall credit quality is “resilient but stretched.” Households are still paying on time, yet many are leaning on credit cards and personal lines to fill budget gaps. Non-mortgage borrowing has inched up over the past quarter, and early-stage missed payments are creeping higher in pockets of Ontario and the Prairies.

CIBC economists say that so far, high employment levels and solid house-price equity have prevented serious credit deterioration. But they caution that a return of unemployment to its historic average could double arrears rates quickly because households have “much thinner cash buffers than in 2021.”

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The 2026 renewal window

Roughly one-third of Canadian mortgages will mature by late 2026. That represents the largest renewal volume since the Bank of Canada began its tightening cycle. Borrowers who took variable products with trigger-rate protections have already seen partial payment hikes, but for fixed-rate holders, the shock is still coming.

Lenders are exploring ways to ease the transition — extending amortisations to 30–35 years, offering “blend and extend” options, or allowing temporary payment relief. These measures soften the blow but don’t eliminate it; total interest costs over the life of the loan still rise substantially.

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Why the calm may be deceptive

CIBC notes that headline figures mask diverging stories. Higher-income borrowers are weathering rate resets with minimal strain, while middle-income families in high-priced metros like Toronto and Vancouver are the most exposed. Average loan-to-income ratios for new homeowners remain near record highs, meaning any income shock — job loss or reduction in hours — could push them to the edge.

The report warns that the present sense of stability may be a “false comfort.” With the Bank of Canada holding its policy rate around 2.25 percent and emphasising patience on further cuts, it’s unlikely that mortgage rates will revert to pandemic lows soon. Households must adjust to a higher-for-longer world.

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What homeowners should do now

1. Start renewal prep early. Contact your lender or broker 6–12 months before maturity to explore rates and terms. Early lock-ins can save hundreds per month if rates rise again.
2. Stress-test your budget. Calculate payments at 5 – 6 percent to see how much flex you really have. Tools on Mortgage.Expert can help.
3. Trim consumer debt. Reducing credit-card and car-loan balances can boost affordability ratios for renewal approvals.
4. Maintain cash reserves. Aim for three months of mortgage payments in liquid savings to buffer unexpected rate shocks.
5. Consider refinancing or porting. Some borrowers may benefit from switching lenders or consolidating debts into a longer-term fixed loan.

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The macro angle

From a systemic view, CIBC does not foresee a credit crisis. Canadian banks carry ample capital and a robust stress-testing framework through OSFI. However, rising mortgage payments could act as a drag on consumer spending and GDP growth. A slowdown in retail sales and housing turnover would weigh on government revenues and business investment alike.

Economist Avery Shenfeld of CIBC put it succinctly: “The system is resilient, but not immune. If renewals tighten household cash flow by hundreds of dollars a month, we’ll feel that through the entire economy.”

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The story for 2025 is one of stability with stress on the horizon. If you’re a borrower with a mortgage maturing within 18 months, this is your window to act. Shop around, model your payments, and strengthen your finances before the 2026 renewal wave hits. Resilience today will only matter if it survives tomorrow’s rate cycle.